Summary: Although entertaining as gallows humor, last week’s statement by ECB President Mario Draghi illustrates important but seldom discussed aspects of the euro-crisis. Here we read and annotate the text.
It’s an oddity of our time that people tend to rely on secondary sources — journalists and pundits — to learn what the world’s leaders say. Twenty years ago major papers, such as the New York Times, ran their speeches in full. Thanks to the Internet we can do so as well. Here we feature a major speech, with some information and analysis accompanying it to provide context.
The EU’s preferred policy solution
- An annotated speech by the President of the ECB
- They know what they want. They don’t see why their actions almost guarantee failure.
- They are relying on hope
- Other posts reporting Europe’s slow march to the cliff
(1) An annotated speech by the President of the ECB
In our world few things are as they seem to be. There are hidden complexities. There are hidden truths. There are lies and misrepresentations. Here we examine this important speech by a high European official, a speech which has electrified not just Europe, but investors around the world (mostly for wrong reasons). Draghi speaks candidly. But to correctly interpret his words we must understand his orientation — described in the annotations.
Speech by Mario Draghi, President of the European Central Bank at the Global Investment Conference in London 26 July 2012
… I think the best thing I could do is to give you a candid assessment of how we view the euro situation from Frankfurt. And the first thing that came to mind was something that people said many years ago and then stopped saying it: The euro is like a bumblebee. This is a mystery of nature because it shouldn’t fly but instead it does.
He refers to the widespread forecasts at its beginning by economists that the euro-system could not and would not work. For details see Can the European Monetary Union survive the next recession?, 11 July 2008. Next he explains the results to date of the euro experiment:
So the euro was a bumblebee that flew very well for several years. And now – and I think people ask “how come?” – probably there was something in the atmosphere, in the air, that made the bumblebee fly. Now something must have changed in the air, and we know what after the financial crisis.
Paul Krugman gives a more accurate explanation: